In the first half of this year, 5 out of the 6 major state-owned banks in China experienced an unusual decline in both revenue and net profit.
According to a report by “Yicai” on September 2, the narrowing interest margins led to a decrease in net interest income, cost reductions, and the continued drag of a weak capital market on the overall industry. The financial reports released by the listed banks have been finalized, further highlighting the industry’s overall pressure, with 5 out of the 6 major state-owned banks experiencing a rare decline in both revenue and net profit.
Specifically, only Agricultural Bank of China maintained a slight year-on-year increase in revenue and net profit attributable to equity holders, while the other 5 major banks all saw a “double decline.”
Among them, Industrial and Commercial Bank of China saw declines in revenue and net profit attributable to equity holders by 6.03% and 1.89% respectively, ranking first among the major banks in terms of decline. Following that was China Construction Bank with decreases of 3.57% and 1.8% in revenue and net profit, respectively; China Merchants Bank with decreases of 3.51% and 1.63%; Bank of China with decreases of 0.67% and 1.24%; and Postal Savings Bank of China with decreases of 0.11% and 1.51%.
Last year, the overall revenue of state-owned major banks had already declined. In the full year of 2023, the six major banks collectively achieved revenue of approximately 35.3 trillion yuan, a decrease of over 160 billion yuan compared to the 36.9 trillion yuan in 2022; net profit attributable to equity holders reached 13.8 trillion yuan, an increase of 28.6 billion yuan year-on-year. Among them, Industrial and Commercial Bank of China and China Construction Bank saw revenue declines on a year-on-year basis, while all 6 major banks maintained positive growth in net profit.
However, in the first quarter of this year, only Postal Savings Bank of China saw year-on-year growth in revenue, and only China Merchants Bank saw year-on-year growth in net profit. The half-year report shows that the six major banks collectively achieved revenue of approximately 1.8 trillion yuan in the first half of the year, a decrease of around 47.3 billion yuan from the same period last year; net profit attributable to equity holders was about 683.4 billion yuan, a decrease of 6.6 billion yuan compared to the same period last year.
The report stated that the main reasons for the decline in net interest income in the first half of the year are the slowing growth rate of assets on one hand, and the narrowing net interest margins on the other hand.
It is worth noting that on April 16 this year, the international rating agency Fitch Ratings downgraded the credit outlook of the six major Chinese state-owned banks from “stable” to “negative,” citing concerns about the Chinese government’s ability to support the banking sector under pressure. A week earlier, Fitch Ratings had also downgraded China’s sovereign credit outlook to “negative.”